CIBIL (Credit Information Bureau Limited) data says 80% of the loans that get approved have a score above 750. The CIBIL score is a number in the range 300 – 900. Higher the number, higher is your chance of availing a Loan and also at a better interest rate. However, credit score is not the only parameter which lenders look at for approval and deciding the interest rates. The rate of interest on unsecured loans can range anywhere between 18 per cent and 26 per cent.

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If your credit score is lower because of default then chances of getting loan is lower, but if the credit score if lower because of the small amount of the loan taken or credit history is relatively recent then possibility of getting loan is higher.

NBFCs (Non-Banking Financial Companies) are more flexible with Credit Scores and Rate cut-offs as compared to Banks. However, they also charge a higher rate of interest as compared to the Banks.

Peer-to-peer (P2P) lending websites can also be an option to acquire funds if you have a low credit score. The lending sites categorise borrowers under different risk brackets, where only 50 per cent weightage is given to the CIBIL data. Someone with a 750+ score is considered a Low-risk borrower while someone with a score in the range of 650-750 generally lies in the Medium risk bucket. Borrowers with no score or with a score less than 650 fall in the High risk bucket. However, since the weightage given to credit score is only 50 percent, the lending platforms also assess banking and social behaviour of the borrower by gauging current repayments, monthly obligation of the borrower, soft data like family details, residence and office stability and social websites like LinkedIn and Facebook.

If the reason of your low score is a default it is a good idea to be transparent about the reason why you defaulted. Lenders don’t like to see a willful default and deceit.

Ensure that all your other credentials are in order

Loan against collateral securities like Shares, Fixed Deposits or Gold is an option that can be explored. Banks & NBFCs are happy to provide loan against collaterals without looking at the credit score. Based on the value of your collateral, you can borrow funds. Though the limit might be lower, it will still take care of the need for your immediate cash requirement.

Before applying for any further loan or facilities, make sure you are eligible to get the loan before applying for it. If the application gets rejected, your credit score will be damaged further.

Make yourself aware of the various lenders in the market.

And, when you do take a loan, ensure all the repayments are made on time. Improving your credit score should be on your priority list.

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